Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in White Collar Crime Highlights

The Department of Justice’s Antitrust Division continues to send a strong message to individuals engaged in conspiracies to rig public real estate foreclosure auctions through criminal enforcement.  Punishing real estate investors engaged in illegal activity that harms struggling homeowners and financial institutions continues to be a priority for the Antirust Division.

Alabama Public Real Estate Auction Investigation

On October 31, 2014, the Antitrust Division announced that an Alabama real estate investor pleaded guilty for his role in a conspiracy to commit mail fraud related to public real estate foreclosure auctions held in southern Alabama.

On May 27, 2014, Hitoshi Hirano, an executive of car heater panel manufacturer Tokai Rika, was indicted to fix the price of auto parts with other Japanese parts manufacturers.

In addition, Mr. Hirano was charged with persuading company employees to destroy records that would reveal the conspiracy. According to the indictment, Mr. Hirano learned of a Department of Justice (“DOJ”) raid in February 2012, and the same month he encouraged his employees to destroy potentially incriminating documents.

Executives and company employees must understand that the destruction of documents during and prior to a government investigation will only cause more legal problems.  Because of technology advancements, the government will learn of the destruction because hitting the delete button is not the end of the document.  The document still exists somewhere.  The proliferation of electronic data storage means that an attempt to destroy documents is much more complicated than it used to be.  A potential evidence destroyer must canvass emails, hard-drives, cloud storage spaces as well as the traditional paper copies. Those who are not thorough enough usually make a bad situation worse, as is the case of Mr. Hirano and Tokai Rikai.  

On May 29, South Korea’s  Yonhap news agency reported that the country’s Prosecutor’s Office has seized documents from the Korea Rail Network Authority (“KR”), to investigate bribery and irregular supply relationships by three to four rail part manufacturers that provided supplies to KR.

In addition, some rail parts manufacturers are being accused of counterfeiting certificates of quality for parts supplied to KR.

Finally, KR officials stand accused by the Board of Audit and Inspection of overlooking the bid-rigging conducted by construction companies in the railway building tenders for a new project that will create a new link between Wonju and Gangneung provinces.

On May 28, 2014, the Financial Times (“FT”) reported that junior employees and sale staff of GlaxoSmithKline (“GSK”) China is suing their management over unreimbursed “bribes” paid, at the management’s behest, to hospitals and doctors.

In the allegations put forth by the employees, the management of GSK China directed staff to purchase fake receipts to cover up the cost of the bribes paid. In some instances, managers’ bribe directives were sent over personal emails, while junior employees were instructed to take out expenses (on the bribes) on behalf of their managers. All this was done to boost the sale of GSK drugs. These employees were also warned to not implicate their managers in any inquiries.

In March, disgruntled GSK China employees sent 25 representatives to GSK’s China headquarters in Shanghai, demanding reimbursements amounting to thousands of dollars per employee. They also accused the management of threatening them with denied bonuses and dismissal for the bribes, despite simply following the orders of their superiors.

On April 11, 2014, the FTC won a court judgment against an illegal immigrant services scam. The court has ordered the defendants, Manuel and Lola Alban of Loma International Business Group, Inc. liable for $616,000 in refunds to Spanish immigrants. The court noted the severe nature of the case due to the amount of harm suffered by the customers. Several were deported and another was jailed for almost 11 months, according to the court. The court found that according to United States Citizenship and Immigration Services data, the agency denied or rejected more than 60 percent of the immigration applications handled by the Albans.

In March of 2013, the court found the Albans to have violated the FTC act by illegally providing immigration services to Salvadorian and Honduran immigrants, even though neither they nor their employees were licensed to provide any such services. Under federal regulations, only authorized providers, aside from attorneys, may accept money in exchange for preparing immigration forms on someone else’s behalf.

Despite this, the court found that the Albans took in an estimated $479,000 to $753,000 from unsuspecting immigrants.  “Misleading people to steal their money and destroy their dreams crosses the line,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is here to protect people from just these kinds of scams.”

On March 5, 2014, the FTC announced that it has stepped up its enforcement efforts of the Fair Debt Collection Practices Act.

According to FTC’s press release, while its debt collection efforts in the past have focused on research and consumer education, the Commission has focused on law enforcement efforts in recent years, especially after the financial crisis.

In 2013, the FTC brought or resolved a total of nine debt collection cases. The FTC brought forth its first enforcement action against text-message debt collection, fined the largest third-party debt collection agency in the world the highest debt collection civil penalty, and obtained temporary restraining orders halting the unlawful conduct and freezing the assets of some defendants while the court case proceeded. For the most egregious violators, the FTC obtained orders which banned the responsible parties permanently from debt collection.

On September 19, Joseph Wayland, head of the Antitrust Division of the Department of Justice, spoke of the Division's recent performance and future outlook at Georgetown Law's 6th Annual Global Antitrust Enforcement Symposium.

In his speech, he highlighted recent successes in tough litigation cases such as the one brought against AU Optronics Corporation for price fixing. With strong legal showings over the past two years, Wayland claimed, the Antitrust Division hopes to demonstrate its strong commitment to preventing unfair market practices and maintaining a competitive market. At the same time, Wayland also touted the Antitrust Division's impressive track record as a key factor in its ability to intimidate firms and resolve negotiations before litigations need to be filed, as was the case with the 3M and Avery merger deal as well as the AT&T and T-Mobile merger which was shelved after a mere four months. According to Wayland, the Division always prefers to settle cases in this way, opting for negotiations and dialog before legal action.

To this end, Wayland credited a great deal of the Division's successes to what he called “front office” workers, a group of individuals consisting of senior managers and directors of criminal and civil enforcement who scrutinize and filter merger cases, selecting the ones in which litigations seem likely and leaving out the ones the pose no real harm to competition. Through this practice, as Wayland pointed out, the Division is able to maximize its resources and commit itself fully to only the most pressing anti-competitive matters. This is not to say, however, that the Antitrust Division has softened on its litigation abilities. As Wayland reiterated throughout his speech, the Division has taken measures to bolster its legal capabilities to ensure that when litigations do occur, it can win.

The Antitrust Division of the Department of Justice (“DOJ”) scored an important victory on September 20, 2012 when AU Optronics Corp. (AUO) of Taiwan was fined $500,000,000 by U.S. District Court Judge Susan Illston in San Francisco for participation in a criminal price fixing conspiracy in the market for thin-film transistor liquid crystal display (LCD) panels. Judge Illston also sentenced two high level executives of AUO to 3-year prison terms each and fined each of them $200,000 for their participation in the criminal conspiracy. See Press Release, U.S. Dep’t of Justice, Taiwan-Based AU Optronics Corporation Sentenced To Pay $500 Million Criminal Fine For Role In LCD Price-Fixing Conspiracy (Sept. 20, 2012) (http://www.justice.gov/atr/public/press_release/2012/287189.htm).

The long running DOJ investigation focused on the world’s leading manufacturers of LCD panels, including AUO, Samsung Electronics Co. Ltd., LG Display Co. Ltd., Sharp Corp., Chunghwa Picture Tubes Ltd., Chi Mai Optoelectronics and Hannstar Display Corp. DOJ filings in the AUO litigation reveal that Samsung’s early approach to DOJ about the ongoing price fixing conspiracy initiated the government’s criminal investigation in 2006. By coming forward first and early, Samsung was granted conditional leniency by DOJ and minimized its exposure in the case.

LCD panels are used in computer monitors and notebooks, televisions and other electronic devices. These finished products are then sold in the United States and around the world. By the time the conspiracy ended in 2006, DOJ estimated that the worldwide market for LCD panels was valued at approximately $70 billion annually. The LCD price fixing conspiracy affected some of the largest computer manufacturers in the world, including Hewlett Packard, Dell and Apple. As key purchasers of LCD panels, these companies were forced to pay the higher fixed prices for LCD panels which in turn increased the retail prices of computers, notebooks, TVs and other consumer products sold in the United States.

On May 3, 2012, the Antitrust Division of the Department of Justice (“DOJ”) announced that an executive of Hyosung Corporation, an affiliate of Nautilus Hyosung Holdings Inc. (“Nautilus”), agreed to plead guilty and serve five months in prison in the United States for obstruction of justice charges in connection with the antitrust agencies' merger investigation of its proposed acquisition of U.S.-based Triton Systems. The transaction was abandoned.

Nautilus is a subsidiary of Korea-based Nautilus Hyosong Inc. (“NHI”). On October 20, 2011, NHI, an automated teller machine (“ATM”) manufacturer, agreed to plead guilty and pay a $200,000 criminal fine for submitting false documents to the antitrust agencies. NHI agreed to plead guilty to two counts of obstruction of justice, which carries a maximum criminal fine of $500,000 per count. The DOJ, however, agreed to a lower criminal fine because NHI voluntarily admitted to falsifying documents.

Kyoungwon Pyo, a senior vice president for Hyosung Corporation, allegedly directed employees to alter corporate documents in July and August 2008 before submitting its documents to the Federal Trade Commission (“FTC”) and DOJ as required in its premerger Notification and Report Form. The DOJ investigated the proposed acquisition and subsequently requested additional documents through a second request. Mr. Pyo allegedly falsified additional documents in August and September 2008 that the DOJ claims misrepresented and minimized the competitive impact that the proposed transaction would have on the market for ATMs in the United States.

On October 13, 2009, Arctic Glacier International (“AGI”) and three of its former executives, Frank Larson (former senior VP of operations), Keith Corbin (former VP of sales), and Gary Cooley (former VP of sales and marketing), pled guilty for their role in a conspiracy to allocate customers of packaged-ice in the Detroit metropolitan area and southeastern Michigan. The company agreed to pay a criminal fine of $9 million.

According to the Department of Justice (“DOJ), AGI took part in this anticompetitive behavior from 2001 to 2007. Specifically, Mr. Larson and Mr. Corbin were involved in the same conspiracy between March 1, 2005 and July 17, 2007. Mr. Cooley took part in the conspiracy between June 1, 2006 and July 17, 2007.

According to the charges, AGI and its former executives conspired with another ice packaging to company to allocate customers of packaged ice by exchanging information for the purpose of adhering to the agreed customer allocations and refraining from competing for the allocated customers.